Frequently asked questions about the price process

About the proposed decrease

SRP's board of directors has approved an overall average 2.2% net decrease effective with
the May 2019 billing cycle (the beginning of SRP’s Fiscal Year 2020). The
move incorporates and adds to an overall annual 1.5% decrease that was
implemented, initially on a temporary basis, for Fiscal Year 2019 (May 2018
through April 2019).

On an overall average basis, the new prices will be 3.7% lower than the
prices approved by the Board during the last price process in 2015 and 2.2%
lower than the prices in effect for Fiscal Year 2019.

Browse all price plans to see how the proposed
pricing changes may affect you. Please note: The information provided is for
estimating purposes only.

The decrease varies by customer class, price plan and usage. Because a decrease in fuel prices is the driver of the proposed decrease, those that use more electricity, and thereby more fuel – primarily commercial and industrial customers – would see greater decreases, on average, under the proposal.

The impacts vary by customer class, price plan and usage. Based on these
factors, a small number of customers may see an annual increase in their bills.
Browse all price plans to see how the proposed
pricing changes may affect you. Please note: The information provided is for
estimating purposes only.

Price plan changes

While the per kWh price during the summer and summer peak seasons on
these price plans is higher than that currently being charged, SRP is reducing
the on-peak hours by changing them from 1–8 p.m. to 2–8
p.m.

A price increase was necessary in these seasons because the same amount of
revenue must be collected in a shorter timeframe (the proposed six hours
on-peak vs. seven hours on-peak).

SRP aims to make M-Power Price Plan prices equal to those of the Basic Price
Plan. In order to do that, we had to raise the summer and summer-peak prices.
However, the proposal includes a significant reduction in winter prices.

As a result of these changes, M-Power customers will see an average 2% increase
in energy costs during summer and summer peak billing seasons, and an average
11.8% decrease in energy costs during the winter billing season. This works out
to an annual average decrease of 2.9% for M-Power customers.

Customers on TOU would save an average of 4.8% annually compared to the Basic
Price Plan. For EZ-3 customers, annual savings would average 3.7%. Savings
could be more or less than these averages, depending on how much energy
customers shift to off-peak hours.

Pricing history

We haven’t raised prices since 2015. Since then, we’ve continually lowered
prices. The last price change occurred in 2018 when SRP’s Board of Directors
approved two temporary price decreases for the summer and winter billing cycles
that were equivalent to an overall annual 1.5% system average decrease on
bills.

Some customers may perceive that price increases have occurred because energy
prices are seasonal and change throughout every year. However, SRP has kept
prices well below the rate of inflation for the past 30 years.

In terms of overall price levels, SRP continues to offer competitive prices. The
graph below demonstrates how SRP compares with other utilities in Arizona and
several other states in the Southwest, both before and after SRP's recently approved
price decrease.

SRP provides more than electricity. It was formed more than 100 years ago in
partnership with the United States to build Roosevelt Dam and the system of
canals in the Valley and provide a stable water supply to the Valley. Today SRP
operates the entire system of dams on the Salt and Verde rivers and manages
groundwater supplies, providing water for municipal, irrigation and
agricultural uses.

As the oldest multipurpose federal reclamation project in the U.S., SRP
continues to perform its long-standing reclamation obligation that electric
power operations can and should be used to keep water costs low and provide a
stable and secure water supply. In our desert environment, a reliable and
low-cost supply of water is critical to the Valley's economy and overall
well-being. As such, a portion of SRP electric revenues that are available
after the payment of operating expenses and debt service is used to provide
partial support for SRP's water and irrigation operations.

Now in its second century of operation, SRP will continue to be instrumental in
the growth of the Valley by managing water sources and providing inexpensive
and reliable electricity.

Controlling SRP costs

SRP continues to focus on controlling costs in the areas of financing,
operations and maintenance, and new capital expenditures while planning to meet
future customer needs and facilitating a path toward a less carbon-intensive
resource mix.

Making a number of key asset decisions, which have resulted in lower costs
for customers. This includes the purchase of natural gas-fired generating
units at Gila River Power Station. These investments, which take advantage
of lower fuel costs, have enabled SRP to provide customers with power at a
lower overall fuel cost, which contributes to the fuel price decrease
outlined in the proposal.

Growing operations and maintenance expenses by only 0.2%. By comparison,
the economy, in general, has experienced an annual average growth rate of
1.8% based on the Consumer Price Index.

Making specific decisions to shut down coal resources when market
conditions, generating resource availability, and fuel contracts allow this
to be done economically without risking reliable operation of the grid.
Since 2016, SRP has planned for and taken several temporary economic unit
shutdowns that resulted in lower overall retail costs. These occurred at
Springerville Generating Station Unit 4 (SGS4) in May 2016 and April/May
2017, and at Coronado Generating Station Unit 1 in April/May 2018. The next
planned occurrence is for April/May 2019. These actions have resulted in
estimated savings of over $9 million.

SRP is a political subdivision of the State of Arizona. SRP's publicly elected
Board of Directors has the authority to establish electric prices. The Board
reviews and decides upon any proposed changes to SRP's price plans, after
providing notice to customers and other interested parties and affording them
the opportunity to provide comments to the Board.

Infrastructure

Since May 2015, approximately $450 million has been spent on maintenance
improvements and replacements of transmission and distribution equipment. As
SRP's transmission and distribution system ages, two ongoing areas of focus are
the wood pole replacement project and the underground cable replacement
project.

SRP's generating assets also require maintenance and improvements. From May 2015
to April 2018, about $100 million was spent on emission controls at Four
Corners Generating Station ($60 million) and Craig Generating Station ($37
million). This spending was driven by regulatory requirements to install
Selective Catalytic Reduction (SCR) systems.

SRP has spent about $130 million on new metering systems since May 2015. These
include new meters for M-Power customers, as well as meter replacements for
end-of-life and current prepay meters, to improve customer functionality and
security and to reduce operations costs for meter exchanges.

Sustainable resources and environmental programs

SRP implemented the EPCAF in November 2009 and used it to track revenues and
recover expenses relating to:

Energy efficiency and demand reduction programs adopted by SRP;

Renewable energy resources obtained or developed by SRP; and

Improvements and initiatives that are not otherwise recovered through base
prices that specifically relate to carbon dioxide emissions reductions as
directed by the SRP Board, including, without limitation, those undertaken
as a result of legislation or by regulation.

In the nine years since the EPCAF was established, renewable energy and energy
efficiency have become a core part of SRP’s business. This no longer requires a
special line item.

Since SRP's goals have changed to incorporate increased sustainability into all
aspects of the organization, SRP's board eliminated the EPCAF as a
separate, unbundled component of retail price plans. The costs of renewable
energy and energy efficiency will instead be recovered through base prices and
the FPPAM.

In October 2017, the Board approved “SRP 2035,” a comprehensive set of
sustainability goals that addresses SRP’s business activities in five priority
areas: carbon emissions reductions, water resiliency, supply chain and waste
reduction, grid modernization, and customer and employee engagement and
community involvement. Details on the five pillars of the SRP
2035 goals are available.

Recognizing responsibilities to future generations, the commitment to
sustainability at SRP means:

Strengthening ongoing stewardship of natural resources;

Proactively addressing customers’ and communities’ priorities; and

Maintaining a strong commitment to fiscal responsibility, while responding
to a rapidly changing industry.

The goals identified within the SRP 2035 framework build upon existing plans and
practices; introduce new areas of focus; and position SRP to meet changing
customer and stakeholder expectations about what it means to be a sustainable
utility. SRP will actively pursue these meaningful goals and transparently
report progress in achieving them. SRP 2035 will make the company better at
what it already does and will enhance the focus on the environmental, economic
and social well-being of the customers and the communities SRP serves.

The items above are by no means a comprehensive list of our commitments.

SRP has a mix of renewables, such as wind, solar, geothermal and biomass energy,
and hydropower, and has undertaken a number of conservation and energy
efficiency measures. We have commitments and investments supporting the
transition to sustainable resources, including the following:

Agreements with the Navajo Tribal Utility Authority to purchase renewable
attributes associated with the energy produced at solar facilities on
Navajo Nation land.

In September 2016, SRP entered into a 25-year agreement with Apple to
purchase the output associated with the 52 MW Bonnybrooke Solar Facility,
which is owned and operated by Apple.

SRP entered into a 20-year agreement, in April 2017, with a subsidiary of
NextEra Energy Resources to purchase the energy and renewable attributes
associated with the Pinal Central Energy Center, which is a 20 MW solar and
10 MW/4-hour integrated battery storage project.

SRP entered into a 20-year agreement with a subsidiary of the AES
Corporation to toll a new 10 MW/4-hour battery storage project that would
be charged from the grid.

SRP has agreed to purchase a 25 MW/4-hour battery energy storage system
from Tesla to be installed at the Agua Fria Generating Station.

SRP has recently signed agreements to purchase the output and renewable
attributes from two new 100 MW solar projects, which are planned to be
utilized for a Sustainable Energy Offering to a group of SRP’s largest
commercial and industrial customers.

SRP plans to add 1,000 MW of new utility-scale solar energy (inclusive of
the 200 MW mentioned above) to its system by the end of April 2025.

Energy efficiency

In addition to optional pricing plans, which help customers manage their
electricity bills, SRP offers a combination of energy-saving advice and rebates
at savewithsrp.com for
residential customers and savewithsrpbiz.com
for business customers.

SRP offers rebates on the purchase of energy-efficient appliances and equipment,
including lighting, cooling systems, smart thermostats, insulation, shade
screens and motors, and recently opened the SRP Marketplace, which offers
energy-efficient products online with instant rebates. Saving advice and rebate
information are available at savewithsrp.com,
savewithsrpbiz.com and
srpmarketplace.com.

Sponsorships and advertising

As a community-based, nonprofit utility, our communications, including paid
media, are designed to educate and inform customers about a variety of topics,
including ways to save energy; discounts and rebates; billing and payment
programs; electric and water safety; water conservation; investments to improve
reliability; and customer service enhancements.